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Unemployment Dynamics, Duration and Equilibrium: Evidence from Britain

  • Simon Burgess
  • H Turon

This paper challenges the consensus on the nature of unemployment dynamics in Britain. We show that the argument that changes in unemployment arise mostly from changes in the duration of unemployment (rather than in the chance of becoming unemployed) is flawed. In fact, while shocks to the outflow do have a part to play up to the late 1970s, the huge changes in unemployment over the last two decades have been mostly driven by inflow shocks. Our model also provides a new explanation of aggregate unemployment persistence based on externalities at a market level rather than individual-level persistence.

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File URL: http://cep.lse.ac.uk/pubs/download/DP0474.pdf
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Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp0474.

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Date of creation: Nov 2000
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Handle: RePEc:cep:cepdps:dp0474
Contact details of provider: Web page: http://cep.lse.ac.uk/_new/publications/series.asp?prog=CEP

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  1. Burgess, Simon & Lane, Julia & Stevens, David, 1995. "Job Flows, Worker Flows and Churning," CEPR Discussion Papers 1125, C.E.P.R. Discussion Papers.
  2. Michael R. Darby & John C. Haltiwanger & Mark W. Plant, 1985. "Unemployment-Rate Dynamics and Persistent Unemployment Under Rational Expectations," NBER Working Papers 1558, National Bureau of Economic Research, Inc.
  3. Simon Burgess & Stefan Profit, 2001. "Externalities in the Matching of Workers and Firms in Britain," CEP Discussion Papers dp0490, Centre for Economic Performance, LSE.
  4. Abbring, Jaap H & van den Berg, Gerard J & van Ours, Jan C, 1997. "Business Cycles and Compositional Variation in US Unemployment," CEPR Discussion Papers 1702, C.E.P.R. Discussion Papers.
  5. Machin, Stephen & Manning, Alan, 1999. "The causes and consequences of longterm unemployment in Europe," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 47, pages 3085-3139 Elsevier.
  6. Steven J. Davis & John Haltiwanger, 1990. "Gross Job Creation and Destruction: Microeconomic Evidence and Macroeconomic Implications," NBER Chapters, in: NBER Macroeconomics Annual 1990, Volume 5, pages 123-186 National Bureau of Economic Research, Inc.
  7. Abbring, Jaap H & van den Berg, Gerard J & van Ours, Jan C, 1995. "The Anatomy of Unemployment Dynamics," CEPR Discussion Papers 1202, C.E.P.R. Discussion Papers.
  8. Karanassou, Marika & Snower, Dennis J., 1998. "How Labour Market Flexibility Affects Unemployment: Long-Term Implications of the Chain Reaction Theory," CEPR Discussion Papers 1826, C.E.P.R. Discussion Papers.
  9. C Bean, 1992. "European Unemployment: A Survey," CEP Discussion Papers dp0071, Centre for Economic Performance, LSE.
  10. van den Berg, G. & van Ours, J.C., 1996. "Unemployment dynamics and duration dependence," Other publications TiSEM 4374742f-8d86-458d-9ab3-6, Tilburg University, School of Economics and Management.
  11. Marek Dabrowski & Stanislaw Gomulka & Jacek Rostowski, 2000. "Whence reform? A critique of the Stiglitz perspective," LSE Research Online Documents on Economics 20167, London School of Economics and Political Science, LSE Library.
  12. Burgess, Simon M., 1994. "Matching models and labour market flows," European Economic Review, Elsevier, vol. 38(3-4), pages 809-816, April.
  13. Stephen Nickell & Luca Nunziata, 2000. "Employment Patterns in OECD Countries," CEP Discussion Papers dp0448, Centre for Economic Performance, LSE.
  14. Burda, Michael & Wyplosz, Charles, 1994. "Gross worker and job flows in Europe," European Economic Review, Elsevier, vol. 38(6), pages 1287-1315, June.
  15. Lancaster, Tony, 1979. "Econometric Methods for the Duration of Unemployment," Econometrica, Econometric Society, vol. 47(4), pages 939-56, July.
  16. Junankar, P N & Price, Simon, 1984. "The Dynamics of Unemployment: Structural Change and Unemployment Flows," Economic Journal, Royal Economic Society, vol. 94(376a), pages 158-65, Supplemen.
  17. Mortensen, Dale T & Pissarides, Christopher A, 1994. "Job Creation and Job Destruction in the Theory of Unemployment," Review of Economic Studies, Wiley Blackwell, vol. 61(3), pages 397-415, July.
  18. Burgess, Simon M, 1992. "The Flow into Unemployment in Britain," Economic Journal, Royal Economic Society, vol. 102(413), pages 888-95, July.
  19. repec:dgr:uvatin:1997050 is not listed on IDEAS
  20. Oliver Jean Blanchard & Peter Diamond, 1990. "The Cyclical Behovior of the Gross Flows of U.S. Workers," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 21(2), pages 85-156.
  21. Layard, Richard & Nickell, Stephen & Jackman, Richard, 1991. "Unemployment: Macroeconomic Performance and the Labour Market," OUP Catalogue, Oxford University Press, number 9780198284345, March.
  22. B Bell & Stephen Nickell & Glenda Quintini, 2000. "Wage Equations, Wage Curves and All That," CEP Discussion Papers dp0472, Centre for Economic Performance, LSE.
  23. Price, Simon, 1985. "The Determinants of Equilibrium Unemployment in Britain: A Comment," Economic Journal, Royal Economic Society, vol. 95(377), pages 189-95, March.
  24. Helene Turon, 2003. "Inflow Composition, Duration Dependence and Their Impact on The Unemployment Outflow Rate," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 65(1), pages 31-47, February.
  25. Burgess, Simon M, 1992. "A Search Model with Job Changing Costs: 'Eurosclerosis' and Unemployment," Oxford Economic Papers, Oxford University Press, vol. 44(1), pages 75-88, January.
  26. Nickell, Stephen, 1998. "Unemployment: Questions and Some Answers," Economic Journal, Royal Economic Society, vol. 108(448), pages 802-16, May.
  27. Berg, G.J. & Ours, J.C., 1993. "Unemployment dynamics and duration dependence," Serie Research Memoranda 0022, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
  28. Donald Robertson & James Symons, 2000. "Factor residuals in SUR regressions: estimating panels allowing for cross sectional correlation," LSE Research Online Documents on Economics 20163, London School of Economics and Political Science, LSE Library.
  29. Nickell, S J, 1985. "The Determinants of Equilibrium Unemployment in Britain: A Reply," Economic Journal, Royal Economic Society, vol. 95(377), pages 196-98, March.
  30. Patricia M. Anderson & Simon M. Burgess, 1995. "Empirical Matching Functions: Estimation and Interpretation Using Disaggregate Data," NBER Working Papers 5001, National Bureau of Economic Research, Inc.
  31. Patricia M. Anderson & Simon M. Burgess, 2000. "Empirical Matching Functions: Estimation and Interpretation Using State-Level Data," The Review of Economics and Statistics, MIT Press, vol. 82(1), pages 93-102, February.
  32. Burgess, Simon M, 1993. "A Model of Competition between Unemployed and Employed Job Searchers: An Application to the Unemployment Outflow Rate in Britain," Economic Journal, Royal Economic Society, vol. 103(420), pages 1190-204, September.
  33. repec:dgr:uvatin:2097050 is not listed on IDEAS
  34. Mortensen, Dale T., 1994. "The cyclical behavior of job and worker flows," Journal of Economic Dynamics and Control, Elsevier, vol. 18(6), pages 1121-1142, November.
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